Doorstep lender Provident Financial pressed the nuclear button in its hostile bid battle with suitor Non-Standard Finance on Tuesday by raising questions over the legality of historic shareholder payouts made by its rival.
In a highly unusual move, Provident asked NSF to explain whether a string of dividends and share buybacks made between 2016 and 2018 were legal, raising the question that NSF may have broken company law.
Provident’s attack follows a forensic accounting probe by the group, which claims to have uncovered shortfalls in the pot of money NSF set aside to pay investors in 2018.
The sudden twist came after NSF, which did not respond to Provident’s statement, said a majority of shareholders had backed the £1.3 billion all-share bid. It did not respond directly to the dividend claims.
Provident shareholders Woodford Investment Management, Invesco and Marathon Asset Management, which own 50.7%, have now said they support the all-share deal.
This means NSF has enough support to force through a takeover if it changes the takeover terms. It currently needs 90% of shareholders on board but can change this to 50%.
To halt the march, Provident laid out a list of six questions for NSF today, including how it would address possible funding issues if the group sold car finance arm Moneybarn.
Provident, which owns lender Vanquis Bank, also asked how NSF would address any competition concerns from the spin-off of Loans at Home.
NSF responded by saying Provident ignored the statement that it had clinched more than 50% of the votes.
The battle between the two sides has become increasingly heated since the bid tussle kicked off in February.
Provident, led by Malcolm Le May, has rejected the bid saying it is too risky and could put customers at harm.
NSF, led by John Van Kuffeler, said new management is required at the firm, which has suffered for over a year after a plunge in the share price.
Goodbody’s financial analyst John Cronin said the latest salvo from Provident was significant. “Questions will be asked about how comfortable the regulators would be with the NSF management team if they are found to have breached company law,” he said.
The FCA regulates Provident Financial and NSF. It did not comment today.